Homeowners say deed restrictions should be lifted on low-income housing

Restrictions set during past decade

By KEVIN HOWE Herald Staff Writer

Posted:
11/14/2012 06:03:40 PM PST

Updated:
11/14/2012 11:32:23 PM PST

Deed restrictions on low-income housing loans that were set during the past decade's housing boom should be lifted, housing advocates said at a press conference in Salinas on Wednesday.

Sabino Lopez, deputy director of the Center for Community Advocacy, and Alfred Diaz-Infante, chief executive officer of the nonprofit Community Housing Improvement Systems and Planning Association Inc. (CHISPA), along with residents of 257 affected houses in Soledad and Castroville, said restrictions deprive homeowners of the flexibility they need to get home improvement loans, settle divorces and refinance their loans for lower interest rates.

Involved are 175 single-family houses built in Castroville in 2004 and 82 houses in Soledad built at the same time, Diaz-Infante said. The Castroville deed restrictions are "in perpetuity," he said, and those in Soledad expire after 45 years.

At the time, the volatile housing market saw double-digit increases in housing prices and CHISPA was concerned that selling houses at low prices could encourage new owners to flip them as the market went up, rather than continue to occupy them as intended, he said. The deeds were restricted to prevent short-term resales.

But the housing bubble burst and homeowners find themselves unable to leverage the equity in their homes to obtain bank loans, Diaz-Infante said.

The houses are getting older and starting to need major maintenance — roof replacements, plumbing and electrical repairs — but banks aren't comfortable making loans in the face of deed restrictions that cloud the homeowners' property titles, he said.

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"It's an unintended consequence," Diaz-Infante said. The owners in both subdivisions got their houses at low prices and invested their own labor — "sweat equity" — as part of the deal, under mutual self-help programs and accepted the restrictions.

But now they are stuck with 7 and 8 percent interest rates and no way to get money for renovations and repairs, he said.

In one case, Diaz-Infante said, a woman who has gone through a divorce has been unable to come to a settlement by buying out her ex-husband's interest in the home.

In the case of the Castroville subdivision, he said, Monterey County has authority to amend the deed restrictions by action of the Board of Supervisors.

The Soledad subdivision's houses were built under the city's redevelopment agency, which was dissolved with all other such agencies by the state last year. Now, city officials are uncertain whether they have the authority to change the restrictions, Diaz-Infante said.

County housing program manager Jane Barr said her office is aware of the two groups' desire to amend the restrictions.

"We've had meetings with CHISPA and CCA and explained what they need to do," she said. "We have not received a request yet. They are aware of the process they need to follow."